So it’s an equal playing field after all. Companies in mature industries can be just as creative as startups, according to a new study conducted by professors from Boston University and Harvard Business School.

In “How Does Innovative Activity Change as Industries Mature,” Boston’s Anita M. McGahan and Harvard’s Brian Silverman analyzed the patent applications of publicly traded U.S. companies from the early 1980s to the mid-1990s.

They found innovation doesn’t decline with age. Using algorithms, the study identified an average of 75,000 to 100,000 patents per year per industry, which includes manufacturing, agriculture, transportation, retail, financial services, entertainment, and business services. This doesn’t change when you throw in “emerging industries.”

“The results surprised us a great deal at first because conventional wisdom has us believing that new companies are more creative while older companies don’t have the incentive to be as innovative,” McGahan says. The study also found that industry leaders can be “displaced” no matter how many patents they hold.

The two professors reason that while young companies often rely on a great new product automatically attracting market attention, they don’t understand how tough it is to attract customers to that product, no matter how great. But established firms are often much better at marketing. “And they have the advantage of established brand names, distribution channels, and marketing programs,” says McGahan. Startups may only be left with the patent.

Changes

For many companies, being in a hot industry was not enough. Even though Handspring had carved out a sizable niche in handheld computers since entering the field, the market had been cool to the stock. But things changed a couple of years ago.

Why? Handspring’s stock had slumped thanks to the ability of employees and other insiders to sell their shares. The Mountain View, Calif., company went public and the “lockup” on its shares-the period during which insiders couldn’t sell the newly public stock-expired. But this unleashed no torrent of selling by investors looking to cash out.

Instead, that overhang of stock just continued to weigh on observers’ minds. Most of those shares are owned by the venture capitalists that had backed Handspring. In late January, after a self-imposed blackout on selling by employees (surrounding the release of fiscal second-quarter results), another bunch of employees’ stock became eligible for selling. “It definitely creates an overhang,” says James Faucette, an analyst at Pacific Crest Securities.

A cloud lifts. Once employees who want to sell their stock do so, that will lift a major cloud hanging over the stock. The worry has been a flood of extra shares swamping any buying demand. Faucette estimates that the December and January lockup expirations free more than 115 million shares for selling, compared with just 11.5 million shares that traded publicly until December.

But Faucette points out that some 63 million of those shares are owned by Handspring’s co-founders-CEO Donna Dubinsky and chief product officer and chairman Jeff Hawkins. And he believes that the duo, who also created and launched the Palm, are unlikely to dump large amounts of their shareholdings. So once the lockup cloud lifts, the stock will have more zip.

The next challenge for the stock will be finding some fuel to push it higher. Handspring shares have been declining since mid-October. It has also tracked the downward slide of shares of Palm, from which it licenses its operating system. The “personal digital assistant” market in which both operate is hot-IDC forecasts sales reaching $20 billion in 2004.

That, however, hasn’t been enough to keep their stocks rallying.

New products. While both Handspring and Palm offer devices for memos, calendars, address books, and email, fans of Hand-spring say the company will succeed on the strength of its new hardware products. Handspring has helped distinguish itself with Springboard modules that clip onto the devices for added features such as games, a Webcam, and a scanner. And in mid-December, it unveiled a VisorPhone module that turns its handheld into a cell phone.

“Innovation on the device side is happening,” says Thomas Sepenzis, an analyst at CIBC World Markets. Sepenzis sees the VisorPhone as one potential catalyst for the stock; if the company sells more than 5,000 or 10,000 of them in the fiscal third quarter, investors will be excited about the communications potential of Handspring.

But just as Palm has created a standard with its operating system, Handspring must go beyond its Visor and Prism devices to turn its Springboard into a platform for licenses to other manufacturers. It may take a while for new products to create momentum for the stock. Says Faucette: “There’s going to be tough slogging for a while.”